Economic Outlook: Stronger growth in 2014 sets the stage for 2015

After a cold start to 2014, the year ended on an impressive note with stronger job creation, gains in economic activity, rising retail sales and a more confident consumer. Adding it up, the economy appears to be on solid ground, showing signs of forward momentum.

The combined sales of the two busiest months of the year for retailers — November and December — brought very favorable holiday results. In January, NRF reported that holiday sales in 2014 grew 4 percent, up from the 3.1 percent growth in 2013. NRF calculated that annual sales grew 3.5 percent in 2014, similar to what the industry saw in 2013.

Looking ahead, we expect retail industry sales, excluding automobiles, gas stations and restaurants, to grow approximately 4.1 percent, with online and other non-store sales expected to increase between 7 and 10 percent in 2015.

The U.S. Economy In 2014

Over the last several quarters, economic activity has been quite volatile, but progress is being made; GDP fell to a negative 2.1 percent in the first quarter of 2014, increased to 4.6 percent in the second quarter, had an impressive growth spurt of 5 percent during the third quarter, but slowed markedly to 2.6 percent in the final three months of the year. And, the economy in 2014 grew by 2.4 percent, better than the Federal Reserve projections for the year. We expect the economy in 2015 will grow between 2.7 to 3.2 percent.

On the positive side, a stronger pace of job creation in 2014 set the stage for further job growth and gains in wages. During the year, 2.95 million net new jobs were added, the most since 1999. Given my expectation for economic growth, I expect payrolls to grow in the range of 220,000 to 230,000 jobs per month.